In 2012, the Equal Employment Opportunity Commission issued an Enforcement Guidance dealing with employer use of criminal background checks in the hiring process. The agency concluded that widespread use of such checks resulted in a disparate impact against minorities due to their higher incidence of criminal convictions. While the EEOC did not prohibit use of criminal background checks in hiring, it said that employers must make individual decisions linking the specifics of the conviction to the job to be performed.
Last month, the Eighth Circuit Court of Appeals used a similar test to conclude that a bank was justified in terminating employees or rejecting applicants based on criminal convictions involving dishonesty. In Williams v. Wells Fargo Bank, N.A., the bank terminated employees after criminal background checks prompted by a federal law that requires FDIC-insured institutions to exclude persons from employment who have convictions for dishonesty or breach of trust. Several minority employees affected by this action filed suit under Title VII, alleging disparate impact based on their race.
The Eight Circuit had little trouble affirming dismissal of the claim. The court noted that due to the FDIC requirement, the bank had business necessity for conducting and acting upon information uncovered by the background checks. The existence of FDIC waivers did not change this analysis because the plaintiffs never tried to demonstrate that the defendant used the waiver procedure in such a way to create a disparate impact.
This case demonstrates that despite EEOC concerns over the use of criminal background checks in employment, companies can continue to exclude persons when there is a clear connection between the conviction and the nature of the work performed. In situations such as this where federal or state law prohibit employment of persons with certain criminal backgrounds, these requirements will serve as a strong defense to discrimination claims resulting from such actions.